MASS MARKET: Retailers anxiously await a decision on tax holiday

Monday

Could this be the summer when the Bay State’s favorite new holiday finally takes a holiday?

Could this be the summer when the Bay State’s favorite new holiday finally takes a holiday?

The second weekend in August is less than two months away, and the Legislature hasn’t passed a bill to continue the state’s most popular 5-percent-off sale. Ever since the sales tax holiday was introduced in 2004 to help retailers through a slow time of the year, the annual event has drawn crowds that rival those seen at the peak of Christmas shopping season.

There’s no need to worry - at least not yet. After all, the Legislature made retailers sweat last year by waiting until late July to pass a bill to continue the holiday. Lawmakers face a balancing act. Set the date too early, and too many shoppers will delay big-ticket purchases. Wait too long, and you don’t give the merchants enough time to prepare their staffs and their promotional efforts.

Critics of the holiday may point to the state’s sales tax receipts, which have been declining or flat for many months, with an increase of just 1.4 percent over 2006 levels so far this year. The conventional wisdom is that this trend is only going to worsen as more consumers shop online instead of heading down the street to their local bricks-and-mortar retailer.

Jon Hurst, president of the Retailers Association of Massachusetts, says the slowdown in revenues should give lawmakers more of a reason to revive the holiday.

Hurst argues that there’s a spin-off effect. Consumers might buy accessories at a later date for a laptop or stereo system they bought over the weekend. The state also benefits from a jump in gas taxes and income taxes that weekend, because more people are driving and working during the two-day holiday. Given how down-to-the-wire things were last year, Hurst says he’s not ready to push the panic button. But he plans to start asking his group’s members to lobby legislators if the holiday bill doesn’t move forward in the next two weeks.

Not everyone’s a fan of the holiday. Mike Widmer, president of the Massachusetts Taxpayers Foundation, sees the event as a feel-good exercise that provides an illusionary boost to the economy. He says most people who buy expensive items - the tax exemption applies for almost everything priced up to $2,500 - probably would have bought those items anyway.

He points to a Department of Revenue report that shows the amount of foregone sales tax revenue during the last holiday totaled nearly $17 million, while the indirect boost in other kinds of tax revenues was estimated at less than $1.5 million.

The fate of the sales tax holiday currently lies in the hands of the two leaders of the Legislature’s revenue committee, which is slated to meet again on Thursday. An aide to Sen. Cynthia Stone Creem, the committee’s Senate chairwoman, says the senator remains a supporter of the idea.

That leaves Rep. John Binienda, the House chairman, who says he still hasn’t made up his mind on the issue.

Part of Binienda’s caginess may just be a ploy to prevent everyone from holding off until August 11 and 12, the potential dates of the tax holiday this year, to go shopping. But Binienda does sound generally concerned when he talks about the drop off in sales tax revenue due to online purchases and the number of consumers who head to tax-free New Hampshire.

But Binienda also knows a popular bill when he sees it. He realizes many of the retailers in the state can use all the help they can get. And he may not be willing to disappoint thousands of Massachusetts shoppers. We certainly love a bargain around here - even if we’re only talking about 5 percent off the price tag.

Jon Chesto is the business editor of The Patriot Ledger. He may be reached at jchesto@ledger.com.